China Q1 growth slows to 6.9%

BEIJING: China’s gross domestic products (GDP) growth weakened to a new post-financial-crisis low in the first quarter, an Agence France-Presse survey shows, as weakness in manufacturing, consumer spending and property prices weighed on the world’s second-largest economy.

The median forecast in a poll of 15 economists indicates gross domestic product expanded 6.9 percent in January-March, down from 7.3 percent in the final three months of last year.

The National Bureau of Statistics (NBS) will release the official GDP figures for the period on Wednesday.

Such a result would represent the worst for a single quarter since the first three months of 2009, when GDP increased 6.6 percent as the global financial crisis wreaked economic havoc.

China last year recorded its slowest annual growth since 1990, expanding 7.4 percent, down from 7.7 percent in 2013.

“The environment for economic growth since the start of the year has not been too ideal,” Zhou Hao, Shanghai-based economist for ANZ, told Agence France-Presse, citing continuing paring down of inventories by manufacturers and further weakness in property.

Indicators so far this year have been weak and signs of slowing growth have mounted.

During the first two months, industrial production and retail sales data struck multi-year lows, NBS data showed, while new home prices renewed their falls in February and March after a rare uptick in January.

Chinese exports and imports both fell in March, authorities said Monday, suggesting difficulties on the commercial front for the world’s biggest trader in goods.

Nevertheless, China’s Communist Party leadership appears largely comfortable with weaker growth, a development top officials say heralds a “new normal” of more stable, consumer-driven expansion in line with China’s increasingly mature economy.

But authorities want to avoid too fast a deceleration that could hurt job growth—a key component of social stability in the world’s most populous nation.

Officials have taken more aggressive steps to loosen monetary policy, with the central People’s Bank of China (PBoC) cutting benchmark interest rates earlier this year for the second time in three months, loosening bank reserve requirement ratios (RRR) to spur lending and taking steps to boost the slumping property market.

Property pain

Economists broadly expect more such moves as authorities seek to keep growth within striking distance of their target of “about 7.0 percent” expansion for 2015.

“The real estate market has been weakening since early 2013 and contracting in 2014,” he told Agence France-Presse.

“The fact that it has continued to contract despite a number of easing policies in the second half of 2014 is particularly concerning.”

Most recently, the PBoC last month lowered minimum down payment levels on second homes nationwide and shortened the ownership period during which sellers are liable for a 20-percent capital gains tax on properties other than their main home.

And while a survey showed that declines in Chinese new house prices decelerated in March from the previous month, they have still fallen in 10 of the past 11 months.

“We should keep in mind that in 2012 the government also loosened monetary policy quite a bit, also made adjustments to ease the housing market and there was no acceleration that year—the economy continued to slow,” Jackson said.

“So what we are talking about here isn’t easing to accelerate the economy. It’s easing in order to find a floor for the growth rate rather than increasing it.”

For this year, the Agence France-Presse survey shows growth slowing further to a median 6.8 percent, lower than a forecast of 7.0 percent in a similar poll in January.

The government last month reduced its annual GDP growth target from the approximately 7.5 percent aimed for in 2014, a clear recognition that slower expansions are on the horizon.

Capital Economics played down emerging concerns that policy easing had so far failed to stem “downward pressure” and that the government’s annual growth objective will not be achieved.

“We’re more optimistic the target will be met as we think there is a lot more that policymakers can, and likely will, do to shore up activity in order to prevent growth from slipping further,” economists Julian Evans-Pritchard and Chang Liu said in a report.

They cited further interest rate and RRR cuts as well as additional easing of lending restrictions.